5 reasons high overhead costs are holding your dental practice back

High overhead is a common problem faced by many dentists. They spend all of their money to cover monthly expenses and don’t have much, if any, left over for practice updates, technology purchases, or retirement savings.

It’s a frustrating situation that keeps many dentists from reaching their full potential, and sometimes leads them to wonder if they might have to permanently close their doors.

I’ve found most dentists have little idea why their overhead costs are above the 55% of collections industry benchmark. Does this sound like you? There are many reasons why your practice may be experiencing skyrocketing overhead costs. Recognizing and addressing those reasons will help you get back on track.

If you’re feeling overwhelmed, don’t worry. Here are five factors that contribute to high overhead costs, and I share my advice on how to take your practice from struggling to thriving.

You hired too many team members

When a practice isn’t as efficient as it could be and tasks aren’t getting done, a dentist’s natural reaction is to hire more team members. Employees often agree, and make it clear just how much more they could get done each day if they had a little extra help.

The problem is, many dentists find that even after hiring someone else, certain tasks still fall through the cracks and inefficiencies remain. What’s the only real change? Higher overhead costs.

Before you post help wanted ads, make sure you truly need more employees. Start by looking at how much time patients spend at the front desk. Check in and check out should take about 10 minutes for each patient. There are 480 minutes in an eight-hour work day, so if your office sees 15 to 22 patients a day, the front desk should be spending 150 to 220 minutes with patients. One front desk person can easily handle this.

If, however, one front office person is spending more than 240 minutes, or a half a day, with patients in an eight-hour day, it might actually be time to look for a new team member.

You don’t offer enough guidance

If tasks aren’t getting done, it could simply be because you, the practice CEO, have not provided employees with enough direction. Team members feel lost, meaning they’re inefficient and not nearly as productive as they should be, and this could be contributing to your overhead woes.

That’s why it’s so important to provide every employee with detailed job descriptions and proper training. Clearly defined performance measurements and continual feedback also go a long way toward enhancing productivity. Provide team members with the guidance they crave, and you’ll notice a huge difference in their confidence and performance.

You award raises even when they are not earned

It’s common for dentists to give raises every year no matter what. They want to keep their employees happy, so they convince themselves it’s a small price to pay. The problem is, if team members aren’t actually earning those raises, these small bumps in pay are doing major financial damage to your practice.

When team members know they’re getting a raise every year regardless of their performances, they have no motivation to improve. After all, they believe they must be doing something right since you keep giving them extra money. Yet productivity stays the same and overhead continues to climb.

Payroll costs should be between 20%–22% of your revenue, with an additional 3%–5% for payroll taxes and benefits. If you’re giving out raises without any increase to your revenues, you’ve likely gone well beyond that benchmark. It’s time to stop giving out raises “just because.” Make it clear how performance will be measured and how raises can be earned. This will motivate employees to excel, which will help you reduce your overhead costs.

Recall isn’t a priority

The recall system is often ignored, which is a huge mistake. I suggest you empower your patient coordinator to revamp recall, and task him or her with reaching out to and scheduling a certain number of past due patients each day. Once this is a priority, practice productivity will rise and overhead will drop.

You can’t remember the last time you raised your fees

Dentists tend to avoid raising their fees because they’re afraid higher prices will cost them patients. The truth is, patients expect fees to go up from time to time. How else can you invest in technologies that improve patient experience?

Consider establishing a fee schedule that’s fair to both you and your patients. Implementing small adjustments throughout the year won’t hurt your patients’ pocketbooks, but it will help put a dent in your overhead burden.

Out-of-control overhead costs can keep you from meeting your full potential. Don’t let that happen. Make changes to reduce overhead and plans to increase production and start growing your bottom line. Do you need more guidance to get started? Feel free to reach out to me at sallymck@mckenziemgmt.com. I’m happy to help.